Capital requirements involve a trade-off between financial intermediation and financial stability. I analyze this trade-off in a macroeconomic model that allows for systemic bank runs, à la Gertler and Kiyotaki (2015). I show that fixed capital requirements make the economy more prone to runs...

EU Member States outside the Eurozone are hesitating to enter the European Banking Union (EBU) and to establish "close cooperation" in bank supervision with the ECB. This paper analyzes the consequences of such asymmetric integration for financial stability in Europe. It argues that the main...